Correlation Between Walmart and Stevia Corp

Can any of the company-specific risk be diversified away by investing in both Walmart and Stevia Corp at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Walmart and Stevia Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Walmart and Stevia Corp, you can compare the effects of market volatilities on Walmart and Stevia Corp and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Walmart with a short position of Stevia Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Walmart and Stevia Corp.

Diversification Opportunities for Walmart and Stevia Corp

0.72

Correlation Coefficient

Walmart  Stevia Corp

Poor diversification

The 3 months correlation between Walmart and Stevia is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Walmart and Stevia Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stevia Corp and Walmart is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Walmart are associated (or correlated) with Stevia Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stevia Corp has no effect on the direction of Walmart i.e., Walmart and Stevia Corp go up and down completely randomly.

Pair Corralation between Walmart and Stevia Corp

Considering the 90-day investment horizon Walmart is expected to under-perform the Stevia Corp. But the stock apears to be less risky and, when comparing its historical volatility, Walmart is 13.84 times less risky than Stevia Corp. The stock trades about -0.19 of its potential returns per unit of risk. The Stevia Corp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  0.36  in Stevia Corp on October 5, 2024 and sell it today you would lose (0.08) from holding Stevia Corp or give up 22.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Walmart  vs.  Stevia Corp

Walmart

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Stevia Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stevia Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Stevia Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Walmart and Stevia Corp

The main advantage of trading using opposite Walmart and Stevia Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart position performs unexpectedly, Stevia Corp can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Stevia Corp will offset losses from the drop in Stevia Corp's long position.

The idea behind Walmart and Stevia Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.